In the middle of snow-speckled fields just off the Crowsnest Highway near Taber, Alta., rusting barrels dot the landscape, among storage tanks and lines of pipe. Soft plastic tape that has peeled off pipes ripples in the cool October breeze.

This site is now classified as an orphan, ever since the company that owned it, Neo Group, went bankrupt three years ago. The site is entirely surrounded by crops — mostly potatoes.

Daryl Bennett, who was born and raised in Taber — his family homesteaded in the area in 1903 — gets out of the vehicle to look around. He’s a director of a local group called Action Surface Rights, which describes itself as “dedicated to helping fellow landowners understand and navigate the maze of government and industry processes.”

He points out the site’s wellhead and flare stack, listing possible hazards: soil contamination, dust, issues with farming, invasive weeds. Then he gestures to the adjacent field, full of potatoes.

“If there’s a leak and it gets into the potato crop, it’s going right there into the French fry factory,” he says.

The site is on a list of facilities under the management of the Orphan Well Association entitled “Orphan Wells to be Abandoned,” where it has languished for at least two years. The list currently contains 2,000 wells that have yet to be properly sealed — known in the industry as “abandoning” — and whose owners are now bankrupt.

Daryl Bennett at an orphan site near Taber, Alberta, left behind by a bankrupt company. The emergency number posted at the site was no longer working. “Who do you call?” Bennett wondered. Photo: Theresa Tayler / The Narwhal

Beyond the barrels and pipes, there are likely other hazards below the surface. Data shows the total depth of the well at the Taber facility is 407 metres, so the risks reach far below ground level.

The problems facing farmers are numerous, Bennett tells The Narwhal. Farmers must ensure their irrigation systems can pass over wells without hitting them, farm around the roads that lead to wellsites, deal with the dust and weeds that come with disturbed soil, and worry about contamination of their crops — and they often face long, paperwork-filled fights to claim the annual rent they’re owed by energy companies.

Before he climbs back into the vehicle, Bennett wanders over to the entrance of the site and looks at the now-defunct company’s sign, still hanging prominently on a small shed. “In case of emergency, please call,” it reads, listing a toll-free number for the bankrupt company.

The Narwhal called the toll free number listed and was met with an automated message stating, “the number you have reached has been changed.”

“If there is a problem, who do you call?” Bennett asks. “There’s nobody there.”

‘Kicking the can down the road’

Bennett is part of a movement of landowners concerned the government — and the Alberta Energy Regulator in particular — is not only struggling to deal with Alberta’s long-standing well issue, but that the organization is propping up a beleaguered industry without requiring the necessary assurances that wells will be cleaned up in the future.

Critics worry that not only are orphan wells already sitting neglected in farmers’ fields across the province, but that a whole new wave of inactive wells are poised to be thrust onto the Orphan Well Association — and that, increasingly, taxpayers may be forced to shoulder the bill.

It has been estimated that at the current rate of spending, it would take 177 years to clean up the province’s inactive, suspended, abandoned and orphan wells.

Daryl Bennett, a director with Action Surface Rights. Bennett has spent years trying to make sure his neighbours are fairly compensated by the companies that drill wells on their land. Photo: Theresa Tayler / The Narwhal

Bennett sees no shortage of possible hazards at orphan sites like this one, including soil contamination, dust, issues with farming and invasive weeds. Photo: Theresa Tayler / The Narwhal

In theory, there is a system designed to ensure wells are cleaned up once companies are done with them, ensuring there is money available for proper reclamation, even if companies go bust.

But critics worry the system has been perverted to the point that the Alberta Energy Regulator is now propping up the province’s oil and gas companies through accounting systems that exaggerate assets and underestimate liabilities by using outdated information — meaning companies are able to drill new wells despite questions around their ability to pay for their eventual cleanup.

“They’re putting the best spin on it,” farmer and Action Surface Rights chairman Ronald Huvenaars told The Narwhal of the regulator’s methods. “If you went to an accountant and had it audited, there’s no way an accountant would ever sign off on that.”

Farmer and Action Surface Rights chairman Ronald Huvenaars on the driveway of his family farm, Pigs Fly Farms. Photo: Theresa Tayler / The Narwhal

Huvenaars stands beside active infrastructure on his family farm. Increasingly, he’s worried that companies in Alberta aren’t taking into account the costs they’ll have to pay to clean up wells like this one when they reach the end of their productive life. Photo: Theresa Tayler / The Narwhal

As one briefing paper published by the University of Calgary put it, “This type of system works well during an oil boom but not so well during an oil bust.”

The trouble is, the Alberta Energy Regulator is still acting like it’s in an oil boom.

“It’s just kicking the can down the road,” Huvenaars said. “It’s kind of like a snowball, it’s getting bigger and bigger as it rolls.”

And that, he said, leaves landowners feeling powerless when it comes to industry activity on their land.

‘Continually releases greenhouse gases’

Conventional wells are drilled through layers of earth — soil, layers of rock, groundwater aquifers — to reach a pocket of oil or gas within a rock formation. When they’re successful, the deposits are tapped and brought back to the surface — through a steel pipe that runs the depth of the well, surrounded by concrete — without contaminating any of the layers above.

Once the well’s productive life has ended, a company can choose to suspend the well (temporarily take it out of service), decommission it completely by fully sealing it off (known as abandoning), or leave it to sit, unsealed, indefinitely. A well becomes an “orphan” if the company that owns it goes bankrupt, whether it is safely sealed or not.

Alberta has no time frames on when a well should be properly sealed and reclaimed, unlike other jurisdictions — deadlines on properly sealing a suspended well range from six months to 25 years in the United States.

When things go awry at an inactive well, there’s risk of explosion, soil and water contamination and release of air pollutants, according to Jodi McNeill, a policy analyst with The Pembina Institute. And then there are the emissions.

“When something hasn’t been plugged, it just continually releases greenhouse gases into the atmosphere,” McNeill said.

As long as the companies that hold the licences to these wells stay financially afloat and honour their cleanup obligations, this isn’t necessarily a significant risk to landowners, Bennett told The Narwhal.

One of his concerns is the implications of the Supreme Court’s upcoming decision on the Redwater case — due out this fall. If the lower court’s decision is upheld, it would allow the creditors of bankrupt companies to collect what they’re owed before any money is used for cleanup of the company’s liabilities.

In essence, the decision could make cleanup the last priority when distributing any funds a company might have left — a substantial concern for landowners waiting for wells on the property to be cleaned up, and a big potential bill for taxpayers.

The regulator, an appellant in the case, is similarly concerned, saying in February, “If this decision is upheld by the Supreme Court of Canada, we — and every other regulator in Canada — will no longer be able to hold companies accountable for cleaning up their mess.”

A gas well on the horizon. Since 2009, the Alberta government has given the Orphan Well Association more than $30 million in grants and moved to loan the organization $235 million in 2017. Photo: Theresa Tayler / The Narwhal

But critics worry that the regulator is already struggling to do just that.

Documents obtained by The National Observer revealed that a top official with the regulator estimated that cleanup of conventional oil and gas wells would cost the province at least $100 billion — a number, it noted, is “expected to grow.”

How that number got to be so big is of no surprise to people familiar with how the regulator works.

“The [regulator’s] system is not achieving anything,” said Keith Wilson, a lawyer who has been working on these sorts of cases for thirty years.

“If anything, it’s creating a false sense of comfort that this problem is being addressed — and we know it’s not.”

Public money for an industry problem

The huge price tag is due, in part, to the large number of wells in the province. A report from the C.D. Howe Institute estimates that there are roughly 450,000 wells in the province — a well for every 1.4 square kilometres in Alberta.

It’s estimated that at least a third, 155,000, of those wells are no longer producing, but have not been reclaimed, representing a financial liability for the company that owns them. If the company goes bankrupt, the cleanup responsibility is shouldered by the Orphan Well Association.

The Orphan Well Association brought in just $30 million from the orphan fund levy, collected from industry, in 2017. Since 2009, the Alberta government has given the Orphan Well Association more than $30 million in grants and moved to loan the organization $235 million in 2017.

The federal government has similarly siphoned public money to clean up after bankrupt companies. Last year, it announced it would allocate $30 million to efforts to clean up orphan wells in Alberta.

Last year, the industry-managed Orphan Well Association reported more than $30 million in total expenditures. In that year they abandoned (the term used to refer to plugging, or sealing, a well) just 232 wells.

In total, just over 600 orphan sites have obtained reclamation certificates over the years, meaning they have been sealed and the sites have been deemed to have been remediated.

There are more than 2,000 wells in the Orphan Well Association’s inventory that have not been sealed, and more than 1,100 that need to be reclaimed. (The Orphan Well Association did not respond to The Narwhal’s requests for an interview.)

An orphan well near Taber, Alberta. Bennett was surprised to find that the pressure on the well was still high. It has yet to be safely sealed. Photo: Theresa Tayler / The Narwhal

In theory, wells shouldn’t end up in the hands of financially unstable companies, because the permissions for and transfer of Alberta’s wells are regulated by the Alberta Energy Regulator, a corporation at arm’s length from government meant to oversee all energy projects in the province.

But, critics worry, the regulator’s system isn’t working.

‘Rosy picture’

There are two primary mechanisms the regulator uses to collect money from companies to fund cleanup of wells left behind by defunct operators.

The Orphan Well Levy is calculated by determining a company’s share of total industry liabilities, using a program called the Licensee Liability Rating. Money paid into this levy is used to fund the Orphan Well Association’s annual cleanup efforts.

The other mechanism is known as the Liability Management Rating system. In this system, a company’s assets (essentially an estimate of the money it makes from oil and gas production) are measured against its liabilities (the cost to seal and clean up all its infrastructure) to establish a ratio. If the company’s ratio of assets to liabilities is less than one — if it has more liabilities than assets — it must pay a security deposit to the regulator.

In theory, this system should ensure that financially unstable companies would have already paid a deposit to cover cleanup costs before ending up in the red.

Crucial to the calculation of a company’s assets is the company’s reported production in the previous year, multiplied by what’s known as the “industry netback,” which is essentially a measure of gross profit.

This could be a reasonable calculation of a company’s assets if updated regularly, but The Narwhal found the regulator still uses profitability numbers that haven’t been updated in nearly a decade.

Keith Wilson is adamant this is very problematic. “The [system] is supposed to be a responsible measure of the ratio of the company’s liabilities to their assets,” Wilson, the lawyer, told The Narwhal.

“It’s obvious to anyone who takes even the most superficial examination of the [regulator’s] program that it grossly overvalues the assets and equally grossly underestimates the liabilities.”

The result, he added, is “a rosy picture that has no bearing to the true risk to the taxpayer and to landowners.”

The landscape surrounding Huvenaars’ family farm is beautiful — and dotted with wellsites. There are 450,000 wells in Alberta, one for every 1.4 square kilometres. Photo: Theresa Tayler / The Narwhal

The land surrounding Ron Huvenaars’ farm. Photo: Theresa Tayler / The Narwhal

Rolling average that ‘has never rolled’

Alberta’s “industry netback” — the standardized measure of a company’s gross profit, used to calculate a company’s financial standing — was set in 2015, but the actual figures used in the calculation of the netback are based on data from 2008 to 2010, according to Melanie Veriotes, a spokesperson for the Alberta Energy Regulator.

In essence, this means the regulator is calculating a company’s assets by using a measure taken from a time when oil prices reached nearly 150 USD per barrel and when natural gas prices followed a similar trend.

Oil prices declined after the 2008 global recession (and subsequently began to recover in 2010), but the average real monthly benchmark oil price (for WTI crude, commonly used as an industry benchmark) over the three years was still over 80 USD per barrel.

In contrast, the average real monthly oil price from 2015 to 2017 was significantly lower — at under 50 USD per barrel.

Oil prices are not explicitly included in the calculation of industry netback, but Veriotes confirmed that “oil prices indirectly influence the industry netback.”

“Oil prices are low today and have been for the last three years,” Lucija Muehlenbachs, an associate professor of economics at the University of Calgary, told The Narwhal by e-mail.

“If more recent data were used, this would make the industry netback much lower.”

Essentially, the Alberta Energy Regulator is allowing oil and gas companies to assume much higher profits than they currently receive — a practise the industry website Daily Oil Bulletin refers to as “providing some relief,” acknowledging that “a recalculation of this value using a more realistic netback would push many producers into negative… territory.”

Veriotes told The Narwhal that industry netbacks are updated “if the values have changed and as priorities allow.”

This doesn’t sit well with Regan Boychuk, a founder of Reclaim Alberta, a group advocating for the cleanup of inactive wells as a job creation program.

He is adamant that the netback was intended to be a regularly updated rolling average, as stated in the regulator’s own rules.

“The regulator has never updated the netback,” he told The Narwhal. “The three-year average has never rolled.”

“If industry had to pay even tiny deposits towards its cleanup obligations, many many companies would collapse,” he added.

“It is that far gone.”

Calculation of liabilities wildly off-base

Critics say the exaggeration of profits alone is a huge problem, one with big implications for the regulator’s ability to ensure industry cleans up its well sites.

For decades, landowners have argued that this is a crucial part of the social contract — that companies pay for the messes they make.

“As parents we teach our children that before they go to the next box of Lego, they need to clean up the last box of toys,” Wilson, the lawyer, told The Narwhal.

Why, he wondered, shouldn’t industry do the same?

The system’s flaws, critics say, mean it’s increasingly feasible that taxpayers will end up on the hook for a larger share of cleanup costs as more companies declare bankruptcy and the Orphan Well Association struggles to keep up.

And, as it turns out, the problem isn’t just that assets are exaggerated by the regulator.

There’s another important number: the liability estimate. This is the estimate of the total cost to fully seal off and clean up a company’s wells — and it’s essential to the regulator’s balance sheet.

The ratio of assets to liabilities is crucial to whether a company can take on new wells, whether it is required to pay a security deposit against the cost of cleanup and the amount it will have to pay into the orphan well fund.

Yet the regulator’s liabilities numbers, too, can be wildly off-base.

Cleanup costs are calculated based on the Alberta Energy Regulator’s estimates from 2015. These numbers have been criticized for failing to take into account variation in site condition and for being much lower than actual costs.

Ronald Thiessen, a researcher at the University of Calgary, has spent years analyzing available data on reclamation costs of Alberta’s wellsites. He found that cleanup costs for at least 60 per cent of wellsites exceed the regulator’s estimates.

According to Thiessen, one of the biggest contributors to cost is the amount of contaminated soil that must be dug up, loaded onto trucks and driven away. Salts present big challenges around wellsites, he said, and leaked oil and gas can also be a problem.

The regulator uses average cost estimates for reclamation to establish a company’s total liabilities, based on geographic area. The regulator’s estimates of the costs to clean up wellsites range from $16,500 in the grasslands to $42,125 in the high alpine; the average estimate across the seven geographical areas is $28,321.

Thiessen’s research, though, found that the median cost of cleaning up an orphan well in Alberta is nearly double the regulator’s estimates, at $53,000 per site.

He recommends the regulator raise its estimates of reclamation costs, which he acknowledges would mean a greater cost to companies in the former of the deposits they would need to pay.

“Taking an average and applying it to any given site is dangerous,” Thiessen told The Narwhal.

Jodi McNeill of the Pembina Institute agrees. “There are a lot of concerns about the formulaic way in which assets and liabilities are calculated,” she said. “Both the asset and liability side are not being representative of true site-based liabilities.”

Bennett and Narwhal journalist Sharon Riley visiting an orphan well near Taber, Alberta. Farmers must ensure their irrigation equipment will pass over wells like these. Photo: Theresa Tayler / The Narwhal

She’s also concerned that the regulator doesn’t take into account larger cleanup costs for the outliers — the sites with huge cleanup bills.

“[The system] can’t account for cases where a wellsite can have especially big problems,” she said. “We’ve seen wellsites that have a cost of $2 or $3 million to clean up.”

When The Narwhal asked Melanie Veriotes, a spokesperson for the regulator, if it planned to update its figures, she said by e-mail “regardless of which assessment tools we use, companies are responsible for the costs associated with cleaning these sites. None of these calculations change that fundamental premise.”

“We are working to update our liability management program,” Veriotes added, noting that the regulator is “reviewing our processes to better understand what is working well and what needs to change.”

Wilson, the lawyer, is adamant that the average cost to clean up a site is much higher than the regulator’s estimates — or Thiessen’s research.

“I get criticized by people in the industry when I say that the average reclamation cost is $300,000,” he told The Narwhal.

“They say, ‘you’re nuts, it’s way higher.’ ”

Thiessen agrees that the average cleanup cost could be much higher than what his research found, but, he noted, “a larger, more representative and publicly available dataset is required,” — something industry hasn’t released.

Wilson points out that even if the average cost to clean up a wellsite was $53,000, the total bill to clean up Alberta’s wells is still enormous.

He pulls out his calculator to do a quick estimate.

“Error!” he says, laughing when his calculator can’t compute the figure, “Error! The number’s just crazy big.”

‘Get rid of it’

Wilson was asked what was wrong with the regulator’s rating system at a conference earlier this year. His answer was clear.

“Everything.”

When asked how to fix the system, Wilson replied, simply, “get rid of it.”

Politically though, that’s tricky. “The current government is in a political competition with its nearest rival, the [United Conservative Party], as to who can project better a pro-industry image,” Wilson told The Narwhal.

Some worry that tweaks to the system could mean a financial disaster, pushing more companies to bankruptcy — and more wells on to the Orphan Well Association, which can’t afford to clean up its current inventory.

There’s also the possibility, according to Muehlenbachs, the economics professor that “fear for the industry [or] fear of what this says of the industry,” might stop the regulator from making any substantive changes.

The idea of propping up companies doesn’t sit well with landowners who have to live with the wells on their land.

And if the Redwater decisions stands, which many believe it will, Action Surface Rights worries it could incentivize companies to walk away from liabilities.

Bennett is worried that companies will “come in and milk the resource as much as they can and abscond with millions of dollars.”

“They privatize the profits and then they bugger off and socialize the losses.”

Journalist Sharon Riley discusses well liabilities with landowner Daryl Bennett in the Taber Tim Hortons. Photo: Theresa Tayler / The Narwhal

‘What do you do?’

All of this leaves landowners like Ronald Huvenaars feeling vulnerable.

Huvenaars’ dad started a farm in 1964. For years, the family raised hogs, though these days they focus mostly on crops — renting out land for potatoes; producing seeds for Dupont. The land for the family’s farm, Pigs Fly Farms, is dotted with shelters for the bees that pollinate canola.

Huvenaars stands beside a derby car used by his kids. Photo: Theresa Tayler / The Narwhal

Huvenaars poses in front of silos on his family farm, Pigs Fly Farms, which produces seeds for Dupont. Photo: Theresa Tayler / The Narwhal

And then there are the wells. In 1985, an oil and gas company approached Huvenaars’ dad about drilling a well on the family farm. His dad agreed.

“It was kind of one of those things where it’s like well, they’re gonna do something anyways,” Huvenaars told The Narwhal, noting that the economy was tough at the time. “There was no money in farming and if you could create a little extra cash, it was enough to keep things going.”

But things have changed. Huvenaars says there’s no way he’d allow another well on his land without a fight.

Action Surface Rights is adamant that the inherent trust between landowners and industry is eroding — and concerned that the way the regulator is enforcing the rules don’t help matters.

But for Huvenaars, there’s little he can do when it comes to the two wells on his land, other than hope for the best. For many landowners, there’s a feeling of powerlessness when it comes to dealing with industry.

“It’s there,” Huvenaars said. “So what do you do?”

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The polluter pay rule sound great in theory, but, when it comes to mining operations in B.C., the often-quoted policy does not reflect reality, says a report, released Wednesday, by the Ecofiscal Commission, an independent group of high-profile economists who look for ways of increasing economic activity while better protecting the environment.

Juggling economic activity and risks to the environment usually involves putting a price on pollution and in a case study of Canada’s mining sector, which looks at financial assurance policies in B.C., Alberta, Yukon, Ontario and Quebec, the economists found that B.C. is not practicing what it preaches.

“Financial assurance in B.C. is stronger in theory than in practice,” says the report, which found that the broad authority given to the Chief Inspector of Mines to set the amount of financial assurance that companies have to post before digging, is used more to encourage economic activity than to deal with compensation or to deter companies from making environmentally-risky decisions.

“In practice, the government has not required stringent assurance. As a result, the province does not hold sufficient financial assurance to cover its potential reclamation liabilities,” it says.

B.C. not honouring polluter pay principle

In 2016 provincial Auditor General Carol Bellringer sharply criticized B.C.’s under-funding of liability for mine reclamation and lack of mining regulation enforcement. The audit was followed by a report by economist Robyn Allan that revealed gaping holes in B.C.’s financial assurance policies.

Since then, the province has made an effort to increase the amount of financial assurance it holds, says the Ecofiscal study.

“However, the province still holds only $1 billion in financial assurance against a $2.1 billion cleanup liability,” it says.

Lead researcher Jason Dion said every jurisdiction has its pros and cons, but B.C.’s financial assurance choices are inconsistent with the polluter pay principle.

“There is scope to do more with financial assurance to help honour that principle,” he said.

Unlike provinces such as Quebec, which demands hard financial assurance, such as cash or securities, to cover the full cost of remediation within two years of a mine starting operations, B.C. phases in financial assurance to keep costs low during the expensive construction stage.

“By phasing in assurance, the province effectively accepts a mine’s still substantial reserves as a form of soft assurance. However, doing so provides weak deterrence incentives for firms during the early phases of an operation. Because the value of reserves can fluctuate, it also undermines compensation,” the report says.

Dion said it is a choice B.C. has made because the initial stages of mine construction are extremely capital intensive, meaning projects may be less viable if the province demanded hard financial assurance.

In an e-mailed statement to The Narwhal a spokesperson for the B.C. Ministry of Energy and Mines said staff are reviewing the Ecofiscal Commission’s report.

“This government recognizes the need to ensure the people of B.C. are protected if a mining company fails to meet its requirements around reclamation and remediation of a mine site,” the statement read. “The Ministry of Energy, Mines and Petroleum Resources requires security at the time of mine permitting and regular review of the amount as conditions change throughout the life of the mine.”

Lack of up-front cash for cleanup can prompt bankruptcy

Quebec stands out as having the most stringent financial assurance requirements in the country and, according to the Fraser Institute annual survey of mining companies, is also one of the top jurisdictions for mining as it has simultaneously tweaked rules and regulations to encourage investment.

The complexity of different tools and financial assurance methods used across Canada is surprising, Dion said.

However, one major gap is that none of the provinces apply financial assurance to disasters, such as a tailings spill.

“If a company does cause a disaster it is liable for that. The tricky part is if they end up declaring bankruptcy or if there is a liability cap, they may not end up bearing the cost. It’s an important gap and financial assurance is a tool we can use to fill this gap,” Dion said.

The lack of up-front cash to clean up a disaster may encourage some companies to declare bankruptcy and is certainly a missed opportunity to lower risks and the potential social costs of mining disasters, the report says.

“If a tailings spill like Mount Polley were to occur in any of these jurisdictions and the responsible company was bankrupted, society would be left to bear the cost. The potential for mining firms to pass on their costs in this way reduces their incentive to reduce environmental risk, exacerbating the risk of a mining disaster,” the study says.

The 2014 rupture of the tailings dam at Imperial Metals’ Mount Polley mine spilled 24 million cubic metres of waste and tailings into Quesnel Lake and nearby creeks and rivers, making it the largest tailings dam failure in Canadian history.

Imperial Metals escaped criminal charges and, although the company is not bankrupt and has paid much of the cleanup tab, Allan estimates that B.C. taxpayers are on the hook for about $40 million.

However, Dion said it appears regulators and the industry have learned many lessons from the Mount Polley disaster and financial assurance plans can add to other efforts to make tailings dams safer.

The Ecofiscal report also points the finger at mine operators who walk away from their obligations.

Abandoned mines a liability

Numbers have improved dramatically since 2006, when there were 10,000 orphaned and abandoned mines across Canada, but it it is another reason why the liability gap must be filled with full financial assurance to genuinely cover remediation, so that governments are not left to foot the bill, the report says.

“Most remediation occurs at the end of a mine’s lifecycle when no further revenues will be generated. This can create perverse incentives for small firms to walk away from their sites before costly remediation and reclamation work begins and for large firms to do the same by structuring their mining projects as independent subsidiaries,” it says.

Also, when mining firms know they will bear only part of the cost of a spill or remediation, there is less incentive to manage the site in an environmentally sound way, it says.

The risk of companies walking away without paying angers Southeast Alaskans who fear that a spill or leak into Alaska’s salmon-rich rivers from the proliferation of mines along the B.C. border, will leave them picking up the costs.

Last year, Allan, in a brief to the Alaska State Legislature, pointed out that Teck Resources Ltd. fully funded its $558 million reclamation obligation for the Red Dog Mine in Alaska, where the state demands cash or bonds up front before a project can proceed.

However, across the B.C. border, where reclamation costs for Teck’s 13 mines was estimated at $1.4 billion, only $510 million in bonding was required, Allan said.

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A leading credit rating agency’s financial downgrading of Imperial Metals Corp. is sending alarm signals through B.C. and Alaska groups concerned about the future of mines operated by the company.

Moody’s Investor Service has reassessed Imperial Metals’ “probability of default rating,” with financial analysts stating the company is at imminent risk of not being able to pay its debts. The company’s rating is “judged to be speculative, of poor standing, subject to very high default risk and may be in default on some, but not all, of their long-term debt obligations,” according to the service.

Imperial Metals, based in Vancouver, owns the Mount Polley Mine near Williams Lake — the site of the 2014 tailings pond collapse — and the Red Chris Mine, a large open-pit mine near the border of Alaska which uses the same tailings pond infrastructure as Mount Polley.

Operations at a third site owned by Imperial — the Huckleberry Mine, near Houston B.C. — have been on hold since last year because of low copper prices, according to the company website.

The company has seen its stock price plummet over the last year and recently completed a new debt financing plan after lenders granted a waiver to avoid default, according to Bloomberg News. The major shareholder is oilsands tycoon and Calgary Flames co-owner Murray Edwards, who previously helped arrange $150-million in loans for the company.

When asked about its financial situation, a company representative referred DeSmog Canada to an Imperial Metals annual report.

Communities and Taxpayers Left Holding the Bag for Bankrupt Mines

Alaskan and director of Salmon Beyond Borders said Imperial Metals’ shaky finances underline the need for binding protections for everyone living downstream from mines in transboundary watersheds.

“We know (B.C.) needs much greater financial-bonding legislation, so to find out that this company is in a dire financial position is just super troubling. We know there is no money available to reclaim the Red Chris Mine, so if the company goes bankrupt, it would be very, very troubling,” Hardcastle said in an interview.

“We need a robust financial assurances mechanism in these shared watersheds.”

ICYMI: In Photos: The Canadian Mining Boom You’ve Never Seen Before

The 2015 annual report of B.C.’s Chief Inspector of Mines (the most recent year available) shows that, like other mining companies in B.C., Imperial Metal bonds do not cover estimated liabilities.

The total bond for Mount Polley was $23.6 million, but the liability estimate is $35.3 million, for a shortfall of $11.7 million.

And that liability estimate should probably be much higher, said Ugo Lapointe, Canadian coordinator of MiningWatch Canada.

The Huckleberry bond was $37 million and the liability estimate $59 million, for a shortfall of $22 million. Red Chris posted a bond of $12 million with a liability estimate of $18 million, meaning a shortfall of at least $6 million.

So Imperial Metals has $73 million in bonding for a total reclamation estimate of at least $103 million, Lapointe said.

B.C.’s Underfunded Mines Represents Over $1 Billion Taxpayer Liability

Last year, B.C.’s Auditor General Carol Bellringer, who, in a report, slammed the B.C. government for failing to adequately monitor mines, said the fund that is supposed to cover reclamation costs is short more than $1 billion.

Another 2016 report by independent economist Robyn Allan found B.C.’s out-of-date mining regulations allow companies to chronically underfund mine remediation and disaster costs, ultimately leaving the burden to taxpayers. Allan estimates B.C. mines represent an underfunded liability of $1.5 billion.

There are over 84 abandoned contaminated industrial sites in B.C., mostly from mining, that will cost an estimated $508 million to remediate, according to the Crown Contaminated Sites Program. Responsibility for these sites falls to the province because the owners and operators of the projects “no longer exist,” according to the B.C. government.

Between 2014 and 2016 the cost of contaminated sites in B.C. rose 83.4 per cent. The spectre of financially unstable mining companies adds to the growing concern that B.C.’s mining boom along the Alaska border is occurring without regard for long-term cleanup and remediation costs.

Imperial Metals remains responsible for continuing cleanup and remediation around Mount Polley, where 24 million cubic metres of contaminated sludge and mine waste swept into lakes and rivers after the collapse of a 40-metre high tailings dam.

The Red Chris mine, which opened in late 2014 and has a 25-year lifespan, has a tailings impoundment seven times the capacity of Mount Polley.

Locals Fear Repeat of Tulsequah Chief Debacle

But Alaskans can already point to a glaring example of how badly things can go wrong when mine reclamation activities aren’t adequately funded.

The Tulsequah Chief Mine, on the Canadian side of the border, has been leaking acid mine drainage into a tributary of the salmon-rich Taku River for 60 years. After two company bankruptcies and frequent promises to clean up the mess, little has happened.

Chris Zimmer of Rivers Without Borders has a sinking feeling that, if Imperial Metals gets into deep financial problems, Red Chris could be a repeat of the Tulsequah Chief.

“We saw this happen at the Tulsequah Chief where we ended up with an abandoned mine pouring acid mine drainage into the river for 60 years. That was exactly the same process,” he said.

The fears are that either the company could go bankrupt and walk away from the mess at Red Chris or, if they are short of money, they will start cutting corners, Zimmer said.

“The government needs to step in and keep a very good eye on this site and what the company is doing,” he said.

Jacinda Mack, coordinator of First Nations Women Advocating Responsible Mining and a member of the Xat’sull First Nation, is already keeping a wary eye on Imperial Metals’ finances.

“I am very concerned with this new information about Imperial Metals,” Mack told DeSmog Canada.

“Will Imperial Metals walk away from their Mount Polley Mine and abandon their responsibilities to clean up and treat the pollution from the ongoing disaster — such as what happened with owners at the Tulsequah Chief?”

“They haven’t been very forthcoming at all about this financial situation…It is really frustrating when they are ignoring things like the lake colour changing and algal blooms that never happened before,” she said.

There are many questions that need answers, such as why B.C. is not requiring Imperial Metals to pay the full cost of the Mount Polley cleanup, Mack said.

“What is B.C. going to do to ensure Imperial Metals meets health and safety requirements and their commitment to clean up Mount Polley Mine?” Mack asked.

Hardcastle is also pushing for more oversight of the transboundary mines, which are among the largest in North America.

“We need to know how we can prevent these mines from getting so far along before there are more protections in place,” she said

Alaska Politicians Pushing for Input on Transboundary Mines

The concerns are echoed by Alaska’s congressional delegation and a letter sent to U.S. Secretary of State Rex Tillerson, signed by Alaska Governor Bill Walker, Lt. Governor Byron Mallott, Senator Lisa Murkowski, Senator Dan Sullivan and Congressman Don Young, says U.S. economic interests could be threatened by B.C. transboundary mining and “inadequate financial mechanisms to assure long term management of toxic wastes and redress for damages from potential releases.”

The letter emphasizes concerns about the development of large-scale hard rock mine proposals and operations in B.C. “and their potential catastrophic effects on Alaska’s communities and habitats surrounding the transboundary rivers.”

The Alaskan politicians want the State Department to push Canada for more input on transboundary mine proposals, development of a database to track cumulative effects on water quality and a decision on whether the issue should be referred to the International Joint Commission.

Mallott and Alaska tribal representatives met with B.C. officials in early November and are planning to go to Ottawa next year to hold further talks on transboundary watersheds, Mallott said in an emailed statement. He will also go to Washington in January to meet with State Department officials.

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It’s been a busy year of municipalities suing fossil fuel companies.

In July, three Californian communities filed a lawsuit against 37 oil and gas companies for their contribution to climate change. Only two months later, San Francisco and Oakland launched their own against five majors, including Chevron, ExxonMobil and Shell. A handful of Vancouver Island municipalities have also sent letters to 20 oil and gas companies demanding compensation for climate damages.

Could car companies be next?

That’s a question that Martin Olszynski, law professor at the University of Calgary, has been wrestling with following his recent research into the history of lawsuits against tobacco companies.

“It was the cigarette manufacturers themselves that produced the vehicle by which tobacco was consumed and then gave rise to all kinds of harm,” Olszynski said in an interview with DeSmog Canada. “We don’t produce oil and gas to consume directly. A large driver of demand is the automobile: the internal combustion engine.”

Here’s a rundown on what lawsuits against auto manufacturers might look like.

Most Climate Lawsuits Filed Against Governments, Not Companies

The first thing to know is that while popular in concept, climate change lawsuits against corporations have always been very tricky to pull off.

Almost all of the 884 climate change cases that have been filed around the world have been against governments for alleged actions or inactions. While still challenging, it can be fairly straightforward to demonstrate liability by showing how a government’s specific decisions undermine climate commitments.

The same can’t be said for suing companies.

Historically, it’s actually been very difficult to prove that the actions of specific companies have resulted in quantifiable climate damages. There’s also the element of alleged complicity by the consumer in making the decision to buy the product.

But that’s changing.

Recent reports by the Carbon Disclosure Project and Climate Accountability Institute have identified between 90 and 100 fossil fuel companies as contributing over two-thirds of greenhouse gas emissions. It gets extremely specific: for example, China’s coal plants spewed out 14.3 per cent of global emissions between 1988 and 2015, while Saudi Arabia’s Aramco contributed 4.5 per cent.

In recent years, there have also been huge improvements in climate science and massive revelations about the role that oil and gas companies have played in suppressing information about climate science, bolstering the chances of potential lawsuits.

Could Automobile #Manufacturers Be Next In Line For #Climate Lawsuits? https://t.co/KT4kt0u2eF #cdnpoli @WCELaw @james_m_wilt

— DeSmog Canada (@DeSmogCanada) November 1, 2017

Fossil Fuel Companies Arguably More Liable Than Automakers

Yet there’s still been very little discussion about the role of automakers.

Andrew Gage, staff counsel at West Coast Environmental Law and co-author of a climate compensation act that makes it easier for jurisdictions to sue large emitters, said that fossil fuel companies have historically been targeted as they’re far more implicated in the proportion of global emissions.

After all, oil and gas products aren’t just used in passenger vehicles, but in aviation, agriculture, heavy industry and heating.

“The fundamental questions about the profitability and the responsibility of the fossil fuel economy as a whole would be beyond what the auto manufacturers play,” he said in an interview with DeSmog Canada, adding that it makes sense to start lawsuits against the industry that’s played the biggest role as it’d be possible to reclaim a higher percentage of damages.

Automobile Lobby Group Sent Letter to New EPA Head Requesting Policy Rollback

Olszynski acknowledges that it’s harder to argue “public nuisance” against car manufacturers as they don’t pull the oil out of the ground themselves, nor are they driving the vehicles. It’s also difficult to prove damages as harm against municipalities may not have materialized in full yet, but will in the future.

But he’s identified two major recent events that might boost the case for suing over negligence.

The first is a letter sent by the Alliance of Automobile Manufacturers to the newly appointed head of the Environmental Protection Agency, Scott Pruitt, requesting a reversal of fuel efficiency standards for 2022 to 2025 models.

(Incidentally, only one major lawsuit has been launched against car companies on the grounds of climate change damages: 2006’s California v. General Motors, which was eventually dropped because of former U.S. president Barack Obama’s commitment to tighten those same fuel efficiency standards.)

The second example that Olszynski pointed to is explicit industry opposition to the proposal of a “zero-emissions vehicle mandate” in Canada — which would require a certain percentage of new cars to be electric, hybrid or hydrogen fuel cell. The auto industry also suggested they have little control over consumer tastes.

Olszynski said that he finds that suggestion “completely divorced from reality.”

In a recent post on the subject, he wrote: “In my view, it is at least arguable that the automobile industry is — and has been for some time — in breach of its duty to warn consumers of the climate change risks associated with its [internal combustion engine] model vehicles, creating a reasonably foreseeable risk of harm to plaintiff municipalities.”

In other words, there’s a solid case to be made that car companies with full knowledge of climate change have taken clear actions to delay or reverse legislation that would significantly reduce emissions.

“The technological choices auto manufacturers make have a huge impact on emissions,” Keith Stewart, climate and energy campaigner for Greenpeace Canada, told DeSmog Canada.

“They’ve known about this problem for a long time. They were part of the original fossil fuel coalition that opposed action on climate change back in the ‘90s where their product was doubt.”

Tobacco Lawsuits Took Decades to Succeed

Many of the details of related litigation still need to be worked out.

Olszynski said lawsuits like this would seriously push the envelope of current tort law and doctrine. Proving “negligence” requires that a defendant breached a “duty of care” to the plaintiff, but municipalities aren’t legally owed that duty of care by car companies. In addition, some of the “attribution science” that apportions liability to certain players is a bit uncertain.

“The minute you start to bring in the auto manufacturers, you have to start thinking about how to apportion responsibility,” Olszynski said.” Is it a 50/50 [between fossil fuel and car companies], in the context of gasoline production that’s destined for transportation use? Increasingly, the sense I have is that analysis just hasn’t really been done yet, in part because no one is totally clear on how to approach that issue.”

The history of tobacco litigation also serves as a powerful example here. Lawsuits against tobacco companies started back in the 1950s, picking up steam — or smoke, perhaps — in the 1980s. All the early ones were beaten back.

But as Stewart mentioned, they resulted in public disclosure of internal documents and enabled new cases. Eventually, laws were rewritten to hold those companies to account.

Then, in 2000, Philip Morris was ordered by a California jury to pay out over $51.5 million to a smoker with inoperable lung cancer, throwing the doors open to more successful lawsuits. Just two years ago, a Quebec court ordered three tobacco companies to pay out $15 billion following a class action lawsuit.

The same could happen with auto manufacturers, with big questions worked out along the way.

Complexity of Lawsuit Not a Reason to Abandon It, Expert Says

There’s one more option that Olszynski mentioned: a third-party claim.

In that case, oil and gas companies would be initially named as defendants. Then, those companies could drag automobile companies into the lawsuit by arguing that they’re simply “meeting a demand” for oil that’s predominantly used by automobiles.

“When push comes to shove, and if this litigation starts to become more of a credible threat, I think they might be inclined to reach out and spread the love, if you will,” Olszynski said.

There’s no doubt any lawsuits of this kind would be extremely complicated. But Gage argues, the public will end up “paying for everything” in damages if a collective conversation isn’t had about the role these industries play in accelerating climate change.

“It’s recognizing that the complexity of the relationship between these two industries should not be a reason to let them off the hook,” he said. “Because otherwise, we’re paying.”

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Widespread criticism of B.C.’s mining rules is undeserved according to Energy and Mines Minister Bill Bennett, who has turned down a recommendation from the University of Victoria’s Environmental Law Centre for a judicial inquiry into mining regulation.

“Given the significant changes this government has made to how mining is undertaken and overseen in British Columbia, including changes to law and policy, additional resources to improve permitting processes and significantly strengthened compliance and enforcement, Government categorically disagrees that a Commission of Public Enquiry (sic) into the Province’s mining industry serves the taxpayers of B.C. Such a process would be demonstrably redundant,” Bennett wrote in a letter to the ELC.

The response has exasperated Calvin Sandborn, ELC legal director, who said the rejection is likely to cost B.C. taxpayers dearly because of immense costs of mine reclamation where environmental damage has been caused by poor government oversight and minimal enforcement of the polluter-pay principle.

“You can pay for an awful lot of public inquiries if you avoid just one disaster,” said Sandborn, who points to how previous public inquiries have improved regulatory systems and helped restore public confidence.

An ELC report, commissioned by the Fair Mining Collaborative, said the regulatory system governing B.C.’s mining industry is profoundly dysfunctional and the public has lost confidence in the province’s ability to protect the environment and communities from poor mining practices.

A Commission of Public Inquiry is needed because mining is an industry that can create “catastrophic and long-lasting threats to entire watersheds and to critical public assets such as fish, clean water, wildlife and public health,” says the report.

In the aftermath of the Mount Polley tailings dam collapse, the spotlight has been on B.C.’s mining regulations and enforcement, drawing highly critical analyses from Auditor General Carol Bellringer, Alaskan politicians and environmental groups, First Nations, Canadian not-for-profit groups such as Mining Watch Canada and communities worried about the safety of tailings ponds in their region.

In addition to the Mount Polley disaster, that saw 25-million cubic metres of sludge and toxic waste water surge into nearby lakes and rivers, public confidence has been shaken by the toxic legacy of old mines, such as Tulsequah Chief, which has leached acid mine waste into Alaska watersheds for six decades and the Sunro Mine at Jordan River where reclamation and cleanup efforts were not enforced.

Simultaneously, there is increasing public discomfort with proof that taxpayers are likely to be on the hook for more than a billion dollars in mine clean-ups because of historical problems and B.C.’s lack of financial enforcement, including the practice of allowing the Chief Inspector of Mines to unilaterally set the amount of reclamation bonds and then not demanding the full amount be paid up-front.

Unlike neighbouring Alaska, B.C. will also accept guarantees, rather than demanding cash or bonds.

B.C. Rejects Request for Inquiry into Mining Practices https://t.co/J3MaLhT2Sw #bcpoli #cdnpoli #Alaska #bcelxn17 @LavoieJudith @MiningWatch pic.twitter.com/sry5MUqZ1J

— DeSmog Canada (@DeSmogCanada) April 11, 2017

Independent economist Robyn Allan, in a brief presented to an Alaska State Legislature committee, underlined the difference in bonds paid by mining giant Teck Resources Ltd. in B.C. and Alaska.

Teck has posted a bond of $558-million with Alaska to fully cover reclamation costs at the Red Dog Mine, which is expected to require water treatment in perpetuity.

In contrast, just across the B.C. border, Teck is responsible for 13 mines — six operating and seven closed — and the province has estimated reclamation liability at $1.4-billion, but has required only $510-million in bonding, Allan wrote in her brief.

Teck is the largest donor to the B.C. Liberals contributing $1,502,444 to the party since 2008.

However, Bennett, in his letter to the ELC, said that, following the release of the Auditor General’s report last May, government commissioned Ernst and Young to undertake an in-depth examination of reclamation securities practice.

“Ernst and Young found that (the Ministry of Energy and Mines) has established a carefully-considered and systematic financial security approach for mine reclamation that includes elements of a risk-based approach,” he wrote.

The review suggests ways of moving forward and an amended “reclamation securities approach” will be completed in 2018, according to Bennett, who is not running for re-election in May.

Bennett wrote in the letter that government has accepted all recommendations of the Expert Panel that looked into the Mount Polley disaster and recommendations made by the Auditor General.

Sandborn disagrees.

“As our submission demonstrated, government has clearly failed to implement the prime recommendations of both the panel and the Auditor General — to move towards elimination of water impoundments and to get the Ministry of Energy and Mines out of the enforcement business,” he said.

Sandborn also dismissed Bennett’s claims that B.C.’s mining regulations are equal to, or more stringent than Montana or Alaska.

“This is demonstrably inaccurate,” he said.

“Alaska requires mine securities of 100 per cent of reclamation costs, while B.C. allows companies to fall far short of that figure. Teck Resources alone has been allowed to fall more than $700-million short in B.C.”

Bennett’s response is similar to his denials after the Mount Polley breach that there had been significant cuts in regulatory staff, Sandborn said,

“The Auditor General’s report showed that we were right and the minister was wrong about that,” he said.

Image: Energy and Mines Minister Bill Bennett. Photo: Province of B.C. via Flickr

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British Columbian taxpayers will be on the hook for $40 million to clean up the worst mining spill in Canadian history and the company responsible has once again escaped criminal charges after a private prosecution was dismissed this week.

In August 2014 the 40-metre-high tailings dam at the Mount Polley mine near Williams Lake collapsed, sending 25-million cubic metres of contaminated sludge and mine waste sweeping into lakes and rivers — but no charges have been laid and no fines have been levied against Imperial Metals, the parent company of Mount Polley Mining Corp.

Since 2005, Mount Polley Mining Corp and Imperial Metals Corp have donated $195,010 to British Columbia’s ruling B.C. Liberal party.

“The key message to Canadians is this was the biggest mining spill in Canadian history and there have been zero sanctions and zero fines, and certainly that’s not because of lack of evidence of damage to the environment,” said Ugo Lapointe, Mining Watch Canada’s program coordinator.

Mining Watch had launched a private prosecution of Imperial Metals and the B.C. government, alleging violations of the Fisheries Act — but federal government lawyers blocked that prosecution on Monday, arguing for a stay of proceedings as there are ongoing investigations by the B.C. Conservation Officer Service, Environment Canada and Fisheries and Oceans Canada.

The stay of proceedings and lack of government action is frustrating as there is a three-year statute of limitations on some offences, Lapointe said.

“This sets the wrong standards and sends the wrong signal to industry and other mines across Canada. It further undermines public confidence in the mining sector and erodes peoples’ trust in the ability of our regulatory system to effectively protect our environment,” he said.

Mining Watch is seeking costs and considering whether to take the case to a higher court, but public pressure is the best weapon and British Columbians should be asking politicians whether charges will be laid and demanding an explanation for the delay, Lapointe said.

A SumOfUs petition signed by more than 30,000 people urging the Trudeau government not to let those responsible off the hook will be presented shortly to federal ministers responsible for enforcing the Fisheries Act.

British Columbians On Hook For Clean-Up Costs

On top of the problem of government inaction, it is galling that Imperial Metals has not paid the full cost of the clean up, said Angus Wong, campaign manager for SumOfUs, which sponsored the petition.

“Instead British Columbians and Canadians picked up a big part of the tab,” he said.

After the dam collapsed, the provincial government assured British Columbians that under the province’s polluter-pay-rules, Imperial Metals would pick up all clean up costs resulting from the catastrophe.

But independent economist Robyn Allan, who has analyzed figures used by Imperial Metals, said in an interview that, despite those assurances by Environment Minister Mary Polak, taxpayers are picking up almost $40 million of the clean up tab, amounting to more than half of the response cost.

That figure is made up of $23.6 million in tax refunds for Imperial Metals and $15.5 million in direct costs incurred by government departments over the past two-and-a-half years, said Allan, former president of ICBC.

“Recoveries for these charges are a paltry $625,000. This is because, under B.C.’s spill cost recovery regulation, cost recovery is severely limited,” she said.

Imperial Metals estimated clean up costs at $67.4 million, a figure that has not changed in more than two years.

Under provincial rules, bonds posted with the province are supposed to cover reclamation after the mine closes, not environmental damage from an accident, and mining companies are not required to prove they have insurance or the financial resources to pay for damage they cause.

“The problem with this provincial government is that they have not made sure, when unintended environmental harm happens, that these companies have enough money to respond,” Allan said.

And, more such spills can be expected according to the independent expert engineering panel that looked at the Mount Polley disaster and predicted two such tailings storage failures are likely each decade unless half the 123 storage facilities in the province are decommissioned.

“The province has taken no steps to develop the recommended decommissioning strategy, but continues to approve wet tailings storage facilities such as Imperial Metals’ Red Chris mine,” Allan said.

“B.C. taxpayers can expect to continue to pay for environmental harm because the provincial government refuses to take steps to implement meaningful policies that ensure that, when the polluter pollutes, it is the polluter and not B.C. taxpayers that pay,” she said.

Mount Polley closed after the dam breach, but re-started full production the following year and Imperial Metals then opened the Red Chris copper mine in north-west B.C. which has a tailings pond and dam instead of dry stack tailings recommended by the expert panel.

Red Chris has raised alarm signals in south east Alaska because the tailings storage facility is upstream from Alaska’s rich, salmon-bearing rivers.

Meanwhile, residents of the area affected by the Mount Polley spill say more work is needed to restore the lakes and waterways.

“We remain concerned with the ongoing discharge of mine effluent into Quesnel Lake,” said Christine McLean of Concerned Citizens of Quesnel Lake in a news release.

“As local residents and businesses, depending on these fish and waters, we want the B.C. government to restore Quesnel Lake and surrounding watershed to pre-breach conditions. We are not opposed to mining development, but we demand that governments enforce laws and ensure all mines operate in a responsible manner,” she said.

The tailings dam disaster is not over for those that live on the land and water and depend on the salmon, said Bev Sellars, chair of First Nations Women Advocating Responsible Mining.

“Nor is it over for those living in the shadows of other existing and planned mines across B.C. What is the point of having laws if governments and industry are not held accountable when they are violated?” she asked.

It is a question being asked with increasing regularity by other organizations concerned about the regulatory system governing B.C.’s mining industry.

A report from the University of Victoria’s Environmental Law Centre, released earlier this month, recommended a judicial inquiry into regulation of the industry saying that the public has lost faith in the province’s ability to protect the environment and communities from poor mining practices.

The ELC report singled out the Mount Polley disaster and ongoing acid mine drainage from the Tulsequah Chief mine as examples of government failing to enforce reclamation and clean up regulations.

Adding to public discomfort around enforcement of mining regulations is a stinging report, released last year by Auditor General Carol Bellringer, who concluded that government’s enforcement efforts were inadequate.

“Almost all of our expectations for a robust compliance and enforcement program were not met,” she wrote.

“The compliance and enforcement activities of both the Ministry of Energy and Mines and Ministry of Environment are not set up to protect the province from environmental risks.”

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Costs associated with the closure and reclamation of 84 abandoned industrial sites, mostly from mining, in B.C. have increased to $508 million, according to new information released from the Crown Contaminated Sites Program.

Responsibility for the sites has fallen to the province because the owners or operators of the projects “no longer exist,” according to a provincial press release.

The estimated cleanup costs have grown by $231 million since 2014, representing an increase of 83.4 per cent, watchdog group MiningWatch notes.

According to the province, a number of the mines, like the Britannia Mine near Squamish, or the Bralorne-Takla Mine in northern B.C., that now present a risk to human and enviornmental health, operated before 1969 when modern environmental legislation was created.

Although the province is quick to highlight work done over the past two years to clean up contaminated sites, Ugo Lapointe from MiningWatch says the significant growth in overall liability signals an urgent need for reform in the mining sector.

“Almost two years after the Mount Polley mine disaster, multiple cases of environmental mismanagement, and exponentially growing costs to clean up contaminated mine sites at taxpayers’ expense, it’s about time the B.C. government starts ‘walking the talk’ on desperately needed reforms in the province’s mining sector,” Lapointe said.

“This is only the tip of the iceberg, as yesterday’s report indicates that only 18 of 84 identified sites have been remediated to date, 16 are still under investigation, and 48 more are categorized as ‘lower priority’ and have yet to cleaned up. About 90 per cent of these sites are mining sites.”

Lapointe said at current rates it will take B.C. 64 years to clean up the remaining sites.

Polluter-Pays System a Failure in B.C.

In May B.C. Auditor General Carol Bellringer issued a scathing report that criticized B.C.’s weak mining liability regime. Bellringer estimated the province’s mining operations carried a $1 billion liability shortfall that ultimately falls onto taxpayer shoulders.

Economist Robyn Allan followed up on that report with a new analysis that showed, when combined with underfunded mining reclamation costs, the liability ballooned to $1.5 billion.

B.C. claims a polluter-pays system is in place for mines: “The Environmental Management Act ensures that those that pollute are held responsible under a polluter pay principle so the taxpayer does not have to assume these clean-up costs.”

Although, according to Robyn Allan, that claim is misleading.

“This statement is not true from the perspective of protecting human health and the environment, nor is it true that polluters are paying for the damage they cause,” Allan told DeSmog Canada. “The polluter pay principle is not working in B.C. For the polluter pay principle to work, polluters must pay for the damage they create. Instead, we find time and again, that it is taxpayers who are paying, or else much of the damage mining companies have caused is going unaddressed.”

Allan’s recent report detailed “decades of neglect in compliance and enforcement activities” within the B.C. Ministry of Mines and the Ministry of Environment.

“The regulators are not protecting the environment from substantial harm or protecting taxpayers from bearing extensive financial cost to fix it,” Allan told DeSmog Canada.

She added the province has standards in place, but doesn’t do enough to ensure the protection of human health or the environment. Both the Snipgold Johnny Mine and Chieftan Metal’s Tulsequah Chief Mine are prime examples of a failed compliance and regulatory system in B.C.

Allan added financial failure in the mining sector, especially in relation to coal, increases these concerns. The collapse of Walter Energy, which Allan outlines in her report, will likely lead to water contamination at the company’s coal mine in northern B.C., Allan said, “because the company was not required to post full financial security” and “is now under bankruptcy protection.”

Allan added a similar situation could unfold with Teck Resources that could see “taxpayers picking up billions of dollars of reclamation and water treatment costs in the Elk Valley in the future.”

“The polluter doesn’t pay if the polluter becomes unable or unwilling,” Allan said. “This is why it is imperative that a fully secured financial assurances system with accurate estimates of reclamation costs and responsibilities be introduced as soon as possible.”

Underfunded Liability Concerns Alaskans Downstream of B.C. Mines

B.C. has at least 10 new mines planed or proposed for northwest B.C., many located above salmon-spawning rivers that travel directly into Southeast Alaska.

Weak regulations, limited liability and a lack of mining oversight has Alaskans living downstream of the mine sites worried another Mount Polley-style disaster will negatively affect local tourism operations and salmon populations.

Concerns over the recent increase in mining activity in northwest B.C. were heightened with the approval of the Red Chris Mine, located in the Iskut and Stikine watersheds. The Red Chris Mine is owned and operated by Imperial Metals, the same company responsible for the Mount Polley mine disaster which sent an estimated 25 million cubic metres of mining waste into the pristine waters of Quesnel Lake nearly two years ago.

The majority of that mining waste, which contains mercury and arsenic, remains on the bottom of Quesnel Lake. No charges or fines were issued in response to the Mount Polley incident.

Recently Alaska’s Congressional Delegation asked Secretary of State John Kerry to step in to protect Alaskan interests from B.C.’s mining boom.

In a letter to Kerry, the delegation wrote, “Alaskans need to have every confidence that mining activity in Canada is carried out just as safely as it is in our state. Yet, today, that confidence does not exist.”

“Should there be an impact to the transboundary waters that flow from Canada to Alaska, our state’s fisheries, tourism and native peoples could all be hurt.”

“Clearly, this program has not been a priority for the B.C. government and nothing in the report indicates that this will change in the future. Nor is there anything to indicate that the B.C. government will seriously enforce the ‘polluter-pays’ principle so that the industry pays for the mess it created,” Lapointe said.

“That’s a shame, because at the end of the day, it’s B.C. taxpayers who will be left with a bigger hole in their pocket to clean up the mess.”

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Taxpayers are being put at serious financial risk by gaping holes in B.C.’s mining regulations that allow companies to underfund mine remediation or disaster costs, says a new report by economist Robyn Allan.

The report, funded by the Union of B.C. Indian Chiefs, describes financial assurance policies for mine site reclamation as “woefully inadequate” and estimates there is more than $1.5-billion in unfunded liability — meaning taxpayers are on the hook both for mine site reclamation, when a company leaves a contaminated site, and for catastrophic events when a company is unable to pay.

“A regime to ensure mine owners have sufficient financial resources to pay for environmental damage and third-party losses from unintended mine accidents is non-existent,” wrote Allan, former CEO of ICBC and former senior economist for B.C. Central Credit Union.

The UBCIC report comes on the heels of a scathing assessment of B.C.’s mining practices by B.C. Auditor General Carol Bellringer and renewed pressure from U.S. politicians to have transboundary mines along the Canadian/U.S. border come under the scrutiny of an International Joint Commission.

Bellringer estimated a shortfall in financial security deposits of $1-billion, but Allan said the Ministry of Energy and Mines had $1.3 billion in site reclamation costs not funded by mine operators by March 2014 and the province has assumed responsibility for reclaiming abandoned mines which will cost another $275-million.

The costs could be higher today, but exact figures are not known as the province no longer makes the figures available, Allan said.

In theory, B.C.’s rules are based on polluter-pay principles, but, as there is no effective system of financial assurances to hold parties liable, B.C. residents and First Nations are picking up a burgeoning bill for mining-related environmental harm, Allan said in the report.

“The province’s failure to ensure that whenever polluters pollute, polluters pay, represents an obvious cost to taxpayers because taxpayers end up bearing the burden instead. If the cost does not fall to taxpayers, then it falls to society along with much of the clean-up, compensation, remediation and/or reclamation going unattended,” she said.

To make matters worse, provincial policies increase the risk of disasters as, with no clear liability, some companies cut corners and flout safeguards, according to Allan.

“In contrast, when a mining operator is unequivocally held financially responsible for its environmental impacts, positive outcomes result,” she said.

Under B.C.’s rules there are few inducements for companies to invest in techniques such as dry-stacking tailings that lower reclamation costs and reduce the risk of spills because the operator may never be held accountable if disaster strikes, Allan said, adding she wants to see companies post full security bonds for reclamation costs.

Other recommendations in the report include requiring companies to hold sufficient financial assurances to meet the full costs of environmental damage and third-party losses from mine accidents — with companies annually providing proof of those financial assurances — and creation of an industry-funded pool to cover catastrophic events if a polluter is unable to pay.

A claims process, independent from the mining company, should be set up for those who suffer environmental damage or losses and companies should publicly report every year on their reclamation plans, risk assessment and amount of security posted, Allan recommended.

Currently the province relies on reclamation estimates by mine operators and, despite the risk presented by the increasing number and growing size of tailings storage facilities, there is no requirement for mining companies to undertake an environmental risk assessment, says the report.

“Neither is there a requirement that companies provide proof to regulators that access to sufficient financial resources, including insurance, exists to meet obligations if an environmental harm event occurs.”

Grand Chief Stewart Phillip, Union of B.C. Indian Chiefs president, said B.C. is enabling a dangerous disregard for environmental monitoring and protection by letting mining companies off the hook.

“Other industrial sectors treat accident insurance and security deposits as a routine and fundamental cost of doing business and, if a warehouse catches fire, a pipeline bursts or a factory has to be shuttered, companies have money set aside to respond effectively and immediately,” Phillip said.

Instead of following the lead of jurisdictions such as Quebec and Alaska that insist on full funding for reclamation — something that creates a powerful incentive for companies to focus on safety and best practices — B.C has placed taxpayers at huge financial risk, Phillip said.

“Factor in the poor performance, lack of enforcement capacity and muddled political direction of the ministries of energy and mines and environment and the failure to ensure all mines are safe and held accountable and British Columbians have a great number of reasons to mistrust the mining sector,” he said.

UBCIC is calling on the B.C. government to adopt Allan’s and Bellringer’s recommendations.

After Bellringer’s report was made public, Mines Minister Bill Bennett said he accepted most of the recommendations, except for creation of an independent mining compliance office, and he agreed that the province’s compliance and enforcement regime needed improvement.

Bennett has also committed to acting on many recommendations that followed the collapse of the Mount Polley tailings dam in August 2014 — a disaster that spilled millions of litres of sludge and mine waste into Quesnel lake and surrounding waterways in central B.C.

The ministry did not respond to questions from DeSmog Canada on the Allan report in time for publication.

The report is underlining concerns of Southeast Alaskans who have watched a proliferation of mines along the B.C./Alaska border and, as an example of the lack of enforcement in B.C., they point to continued pollution, stretching over decades, from the Tulsequah Chief mine where rusty, acidic water is draining into a tributary of the Taku, one of Alaska’s major salmon producing rivers.

The report underscores existing grave concerns about the lack of financial assurances, said Heather Hardcastle of Salmon Beyond Borders, who wants to see an adequate bonding system in place.

“We are demanding that the state, the province and both federal governments come up with a mechanism to make sure we will be protected downstream,” she said.

“This is why we need an international solution to an international problem. The money has to be set aside to adequately cover a catastrophe that most likely will happen.”

The Allan and Bellringer reports are timely as the issue is gaining increasing traction with both federal governments, Hardcastle said.

Chris Zimmer of Rivers Without Borders said the reports are significant because mines in the Taku, Stikine and Unik watersheds will have long-term acid mine drainage and water treatment needs that are not currently funded.

“It’s now more important than ever that Secretary (John) Kerry work with the Canadian federal government to ensure Alaska’s water and salmon are not harmed by mining in B.C.,” he said.

Image: Tulsequah Chief mine on the banks of the Tulsequah River, a tributary of the Taku/Rivers Without Borders.

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This is a guest post by Ian Miron, Ecojustice staff lawyer. 

Proposed pipeline liability regime steps in the right direction, but leaves too much wiggle room for polluters.

At this very moment, Canada’s liability regime is woefully inadequate when it comes to making sure that polluters pay in the event of a pipeline rupture or oil spill. That means that Canadian taxpayers like you would shoulder an inappropriate degree of the risk in the event of a serious pipeline accident, like Enbridge’s Kalamazoo River spill in Michigan.

According to recent estimates, that spill — the largest in United States history — cost more than $1.2 billion to clean-up. By comparison, Canada’s strictest liability law would have only made Enbridge automatically liable for a paltry $40 million, while providing the company with an opportunity to wriggle off the hook for any further costs. 

Now consider that a number of controversial new pipeline projects have been proposed in Canada, each bigger than the last. Between Enbridge’s Northern Gateway (525,000 barrels per day), Kinder Morgan’s Trans Mountain expansion (890,000 barrels per day) and TransCanada’s Energy East (1.1 million barrels per day), thousands of Canadians may find pipeline infrastructure — locking us into a fossil-fuel economy for another generation — snaking right through their backyards.

Each project comes with an array of heavy environmental risks, including significant upstream and downstream greenhouse gas emissions. But for many Canadians, the very real threat of a major oil spill is a tangible and pressing concern, which is why it is absolutely imperative that Canada bring in a stricter, more comprehensive liability regime.

The good news is there is some progress to report. Earlier this month, the federal government introduced Bill C-46 in the House of Commons. If passed into law, Bill C-46 would completely overhaul the statutory liability regime for federally-regulated pipelines in Canada.

Here’s a quick look at a few encouraging developments and shortcomings of the bill:

The Good

     Polluters will be absolutely liable for harm caused by a pipeline spill.

• This means that the company operating a pipeline will be liable in the event of a spill even if it hasn’t been negligent and hasn’t broken any laws. Bill C-46 will also require a company to have enough financial resources to cover, in full, the absolute liability limit. That limit will be $1 billion for oil pipeline companies whose pipelines have the capacity to move at least 250,000 barrels per day. The limit for gas and other pipeline companies (as well as smaller oil pipeline companies) may be set out in a future regulation. It is also worth noting that Cabinet has the power to increase, but not to decrease the absolute liability limit for major oil pipeline companies.

  Polluters will be liable for environmental damages.  

• The bill makes polluters responsible for losses of “non-use value” of public resources, or environmental damages, even if those damages don’t affect the environment’s commercial (or “use”) value. Recognition of so-called “environmental damages” is rare in Canadian statutes, although it is well-developed in U.S. oil spill legislation. Polluters will also be liable for any actual losses or damages suffered by individuals and for any clean-up costs incurred by the government.

  New tools to recoup clean-up costs from polluters.  

• Bill C-46 creates several new tools that, if implemented, will enhance the National Energy Board’s ability to recoup clean-up costs from a polluter, including some that appear to allow the Board to recover more than the absolute liability limit. The bill also gives the Board the power, in certain circumstances, to recover costs associated with a spill from the pipeline industry at large, not just from the polluter. Cabinet will also have the ability to establish a special tribunal to hear and decide claims for compensation. Interestingly, any compensation awarded by the tribunal would be paid directly out of government revenue. This should make it easier for those affected by a spill to obtain compensation, but could leave taxpayers on the hook for this compensation if other tools aren’t used to recover money from the polluter.  

The Bad

     It’s too discretionary.

• Many of the new tools are discretionary, meaning that either the National Energy Board or politicians (i.e., Cabinet) get to decide whether or not they will be implemented. It is conceivable that some tools might not be implemented for political or other reasons, weakening the protection and peace of mind this bill is intended to offer Canadians. While Bill C-46 has the potential to make some important improvements to Canada’s pipeline liability regime, it’s too early to tell whether this potential will translate to real, on-the-ground benefits for Canadian taxpayers.

  It has significant gaps.  

• For example, Bill C-46 doesn’t identify the absolute liability limit for gas and other non-oil pipeline companies, or for small oil pipeline companies. Instead, this limit might be set in the future by a Cabinet regulation. Likewise, Bill C-46 provides no clear guidance on the calculation of “environmental damages,” nor does it provide the government with the power to develop such guidance at a later date through regulation. Because recognition of this kind of damages is very new in Canadian statutes, this omission makes it less likely that a government will try to recover compensation and weakens the potential benefits of including these damages.

  It doesn’t impose unlimited absolute liability.

   
• Finally, and perhaps most crucially, Bill C-46 doesn’t impose unlimited absolute liability on polluters. In fact, Bill C-46 takes a step back by eliminating the government’s ability to recover clean-up costs for a pipeline spill under the Fisheries Act, which applies in certain circumstances to make a polluter absolutely liable, without limit. No liability regime can truly and comprehensively be termed a polluter pays regime unless and until polluters are made absolutely liable for the full costs of environmental harm. Although a liability limit of $1 billion for some companies is a good first step, we only need to look to Michigan and Kalamazoo River to know that the clean-up costs for a major spill can top that number — and that doesn’t include compensation for damages.

The Takeaway

Bill C-46 is a much needed, overdue first step towards a “polluter pays” regime for pipelines in Canada. In general, it could add a lot of good, innovative tools to the National Energy Board’s toolbox that could effectively protect Canadian taxpayers from paying the clean-up costs in the wake of a pipeline spill. How effective these tools will be is, unfortunately, left largely to the discretion of the Board and politicians. This lack of certainty about the degree to which polluters will be required to pay for their pollution undermines what is, in principle, a good first step.

This post originally appeared on the Ecojustice blog.

Image Credit: KARK 4 News via NRDC

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This is a guest post by Glen Thompson. It originally appeared on Abbotsford Today the Watershed Sentinel and is republished here with permission.

“Once the oil leaves the dock, Kinder Morgan holds no obligation or responsibility, even 10 metres out – that’s the carrier’s liability.”

At the last two information events in Chilliwack, Kinder Morgan brought a large team of professionals and specialized aids to cover an exhaustive range of issues. Resembling a Royal Commission, everything concerning the proposed pipeline was in the tow of a Subject Matter Expert and neatly secured in a rolling briefcase.

The first audience was the full Board of the Fraser Valley Regional District (FVRD) and the second, an invited group of government regulatory officials, community leaders and representatives of major environmental organizations. Audiences with a formidable amount of assembled oversight.

The new pipeline, it seems, is as complicated as the first mission to the moon, with a robust 15,000 page draft plan, guiding a small army of civil engineers, scientists, and project leads. It took no less than nine expert presenters with technical analysts standing by, to present an hour and a half project overview to the FVRD Board.  

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Sitting two rows deep, the project leads extolled advanced science and gleaned wisdom distilled from forensic analysis of past catastrophes. The presentation team successfully stick-handled their way through the Boards member’s queries; air quality, the depth of the pipeline in deep rooted agricultural crops, financial compensation capacity and riparian protection.

The second event was a long afternoon of Kinder Morgan being slow cooked by fully qualified, and at times pointed, questions from a highly informed group of community leaders, advocates and government agency analysts. Kinder Morgan walked away roughed up, limping a bit, but uninjured. Every concern it seemed, had a graph, a published opinion or a mitigation plan and supposedly every bit of it, was reasonable, given the daunting task of moving extremely heavy oil, over mountains, in February.

At the FVRD meeting, a single phrase, made by the pipeline’s head director, hung in the air like a high fly ball. I’ll never forget the finality in his voice, “Once the oil leaves the dock, Kinder Morgan holds no obligation or responsibility, even 10 metres out – that’s the carrier’s liability.” Nobody caught the ball.

The Exxon Valdez

The oil cargo that was loaded into the Exxon Valdez traveled safely through the supply pipeline from Prudhoe Bay without incident. The Alaska coast disaster had nothing to do with the pipeline, and everything to do with the carrier. The Kinder Morgan director’s sharp statement pulls the sheet off the question: Who will take Kinder Morgan’s oil out of the Port of Vancouver? West Coast oil tankers are a critical link in the supply chain between the Alberta Rigs and the far off Chinese refineries.

The little known outcome from the Exxon Valdez case is worth considering when examining the full supply route.

The Exxon Valdez ran aground on Bligh Reef in 1989 dumping hundreds of thousands of barrels of oil into Prince William Sound. The ship’s Captain Joseph Hazelwood, an alcoholic, was reported to be intoxicated and had stepped away from the bridge at a critical moment.

A lawsuit alleged Exxon negligently allowed a known alcoholic to be in charge of a vessel and failed to maintain a collision avoidance system that, if functioning, would have warned the crew. The system had been broken for over a year.

In 1994, international media outlets hammered out stories when a jury’s verdict announced Exxon would have to pay a massive $5.3 billion dollar fine. This was enough to pay for the cleanup, compensate 38,000 economic victims and punitively punish the corporation firmly enough to prevent it from ever happening again. The public was satisfied in the justice system and the media moved on.

Exxon Appeals

In 2002, Exxon appealed. The case was heard by the Ninth Circuit Court of Appeals and the fine was dropped to $4 billion. Exxon appealed. The fine was raised to $4.5 billion. Exxon appealed. The 2nd appeal ruling was struck down and the fine was reduced to $2.5 billion. Exxon petitioned for a rehearing but failed, the $2.5 billion fine was upheld.

After the accident, Exxon towed its ripped up vessel to California for repair. The cost of putting her back in service would be $30 million dollars. In 1990 the U.S. Congress passed a law (375 – 5) that prohibits a tanker that has spilled more than one million gallons of oil from entering Prince William Sound.

In 1998 Exxon launched a legal action against the law and tried to return the ship to service on the Alaskan coast. They claimed the law unfairly targeted Exxon, and argued past incidents are not an indicator of an increased likelihood of a future accident. In 2002 Exxon lost the case and by that time the law had prevented 18 ships from entering the sound.

In 2007, Exxon filed a fourth appeal of the fine, this time in the U.S. Supreme Court. Using past case settlements Exxon lawyers argued that a punitive judgement in a maritime case based on reckless behavior should not impose a fine greater than the amount of compensation damages.

In 90 minutes Exxon’s lawyers reduced the fine by $2 billion dollars from $2.5 billion to $500 million. The 5 – 3 decision was supported by (former Monsanto attorney) Justice Clarence Thomas. Exxon paid what amounts to 10 per cent of the original fine.

Exxon is based in New York. It is the world’s third largest company by revenue (est. $420 billion annually). It is readily subject to, and bound by, American law; but despite this, the prosecution of Exxon was largely unsuccessful.

If a U.S. Court has difficulty prosecuting a U.S. company, how would a Canadian court fair prosecuting a Chinese company?

The lesson of the Valdez is that petroleum exporting ports such as the Port of Vancouver need solid legal protection and regulations in place prior to spills. A Chinese Oil conglomerate is likely to be even more challenging to fine or regulate than Exxon.

Who will ship oil to China, state-run China Shipping, Exxon’s shipping subsidiary, Liberian Oil Tankers?

The Kinder Morgan pipeline approval must include a regulatory mechanism for preventing any flavour of Liberian Oil Tankers, a financial bond formula to cover spills, and a double hull safe shipping certification, like the one in place in the Mediterranean. The pipeline should not be considered without these controls.

The current pipeline approval system is as irresponsible as licensing a pub without a drunk driver law. Kinder Morgan needs to serve its oil responsibly. It is not reasonable or logical to separate a pipeline approval from tanker regulation.

The Exxon Valdez was renamed several times by Exxon and eventually sold to a Hong Kong company. She collided with another ship in 2010 and sent to ship breakers for scrap. Under her final name Oriental Nicety, she was the subject of a case in the Indian Supreme Court, beached and dismantled at Alang, India in 2012.

Image Credit: Exxon Valdez cleanup via Buffalo State University.

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A new report reviewing Canada’s tanker spill prevention and response regime released by a government-appointed expert panel has reignited concerns over the impact increased tanker traffic and a potential oil spill could have on the British Columbia coast. 

The 66-page review of Canada’s oil-spill response system makes a total of 45 recommendations to government and industry, including annual spill training exercises, geographically based risk assessments, improved emergency response times and increased funding for Environment Canada, Transport Canada and the coast guard.

The panel also recommends the removal of a current $161 million liability cap — a change the federal government is describing as a move to a ‘polluter pay’ scenario.

Yet Karen Wristen, executive director of the Living Oceans Society, said the report’s recommendations do not hold industry accountable in the event of an oil spill:

"Under current regulations, the ship-source oil pollution fund, which is a fund presently containing about $400 million, only has to pay out $161 million per spill. What they’re saying is make the whole $400 million available for any one spill. It’s a lot of money but it’s nothing compared to the estimated loss from a spill along the Enbridge tanker route, which has been estimated to be about $10 billion. So to say this is unlimited liability and polluter pays is a bit rich," she told DeSmog Canada. 

What is worse, Wristen said, is in the event the pollution fund is depleted, the recommendation is to borrow additional funds from Canadian taxpayers.

“If we already know that the losses are going to be an order of magnitude higher, why not put a levy on industry now while they are going to be profitable, and get that money built up in the fund? This is the sort of made-for-industry approach that these recommendations take: we won’t bother about it unless it happens,” Wristen said.

Federal Natural Resources Minister Joe Oliver and Minister of Transport Lisa Raitt were in Vancouver to release the report.

"Marine shipping contributes importantly to Canadian economic growth, jobs and long-term prosperity," Oliver stated in a government press release. "The tanker safety report commissioned by our government provides independent, objective recommendations that will support our goal of world-class maritime safety."

But Wristen, who attended the announcement, challenges the claim this spill response regime puts the long-term interests of British Columbians first.

Canada’s plans for the West Coast don’t “deal with the fishermen and tour operators who might lose their livelihood,” Wristen said. “There’s nothing about loss of livelihood, loss of personal property, damages, that sort of thing…the costs of oil clean up alone in the last few major spills we’ve had to look at would have more than exhausted what’s available…There’d be nothing left over for the losses of ordinary Canadians.”

The federal government is hoping to establish what it called a "world-class tanker safety system" in an announcement in 2013. The national review is already being seen as an attempt to curry favour with British Columbians wary of increased oil tanker traffic on the coast.

Oil Spills a Concern for B.C. Government

In August, briefing notes from B.C. environment ministry bureaucrats revealed they were worried even a moderate oil spill would overwhelm the province’s ability to respond. Cuts in the 2012 federal budget led to the closure of Environment Canada’s regional spill response offices in Vancouver and other cities, further hindering efforts to contain an oil spill on the West Coast.

A study commissioned by the provincial government and released in October found only three to four per cent of a relatively small oil spill on B.C.’s north coast would be recovered within the first five days.

This finding was in line with B.C.’s final submission to the panel reviewing Enbridge’s Northern Gateway oil pipeline and tanker proposal, which cites an Enbridge witness as saying: "With respect to…most open ocean spills, no oil from a spill is recovered; the oil remains in the environment … there are significant periods of time [68.5% of the time during Fall/Winter in the "Open Water Area"] during which spill response will be impossible or severely constrained."

In that final submission, the province says, “The goal is effective response [to oil spills].” What’s notable is the use of the phrase “effective response” versus “world class response.” In many cases, recovering 10 per cent of spilled oil is considered “successful” and thus could be coined “world class,” but not necessarily  “effective.”

Use of Dispersant Recommended by Panel

Given the unique risks posed by bitumen, the thick substance mined from the oilsands and destined for the Northern Gateway pipeline if approved, the terminology is especially important. In B.C.’s final submission to the panel, the province writes: "[Enbridge] acknowledges that it knows of no techniques to effectively remove dissolved oil from the water column. [Enbridge] acknowledges that the fraction of the total oil volume that sinks can exceed 50%," and "recovery and mitigation options for sunken oils [e.g. weathered bitumen] are limited."

The tanker safety panel also recommended dispersants and in situ oil burning are used in the event of an oil spill — recommendations Wristen finds more favourable to industry than spill-response workers and British Columbians living or working on the coast.

“That’s another one that was a made-for-industry recommendation and it’s got really grave consequences for the environment and for people responding to the spill or anywhere near the spill. There are huge concerns with the human health impacts from the use of dispersants.”

Wristen points to an ongoing class action lawsuit against BP for its use of chemical oil dispersants in the Gulf of Mexico as evidence of the method’s drawbacks, including dangers to human and environmental health.

The dispersant, Wristen said, makes its way into the food chain and is acutely toxic to some organisms.

“So we think this is a very, very poor idea. It’s popular with industry, though, because it’s actually cheaper to spray this stuff and say ‘all gone’ rather than actually work at cleaning it up. It prevents the oil from collecting on the beaches in a way that you can see it. So it’s there but you can’t see it.”

Taxpayers on the Hook

The panel’s report cost taxpayers $40 million and is one of three reports expected to cost a total of $120 million.

According to Wristen it will take hundreds of millions of dollars and “probably decades” to make these recommendations work. Effective spill response plans, integrated with local resources, could take years to set up, she said.

She added: “Both ministers Raitt and Oliver were at pains to say they were not committing to implementing anything that was in [the report]. They would take these recommendations back to their respective departments and presumably industry — they said ‘stakeholders’ — to see what would work. They’ll certainly be getting a very strong message from a number of quarters, I would think, that industry really does have to pay for this.”

There’s no indication, however, that the government plans on enforcing that, Wristen said.

The tanker safety panel is due to begin work on a second report in early 2014, reviewing national standards for ship-sourced spills of bitumen and liquefied natural gas — both proposed to be shipped from the British Columbian coast. This forthcoming report will also examine requirements for oil development including spill response in the Arctic.

In 2010, there were 71 oil tanker transits through Vancouver. Pipeline proposals by Enbridge and Kinder Morgan could bring 600 oil tankers to the B.C. coast each year. 

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